November 18, 2019 / 8:06 PM / 24 days ago

TREASURIES-U.S. long-dated yields slide to 2-week lows on trade uncertainty

    * U.S. 10-year, 30-year yields fall to two-week lows
    * China reportedly pessimistic about a trade deal-CNBC
    * Trump, Powell meet for 2nd time, discusses economy, rates 
    * U.S. yield curve continues to flatten amid trade standstil
l

 (Adds new comment, updates prices)
     Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 18 (Reuters) - U.S. long-dated Treasury yields
 fell to two-week lows on Monday, after a report triggered fresh
 doubts about a trade deal between the United States and China.
    Citing a government source, CNBC reported on Monday that Bei
jing was pessimistic about a trade deal with the United States, 
troubled by President Donald Trump's comments that there was no 
agreement on phasing out tariffs.
    A scenario with no U.S.-China trade agreement would be detri
mental to global growth, analysts said, pushing the Federal Rese
rve to cut interest rates further.
    "It seems that the tariff rollback issue is a sticking point
," said Michael Chang, U.S. rates strategist at Societe Generale
 in New York.
    "Further escalation of the trade war is probably going to ra
ise the risk of us slipping into recession. That's something the
 Fed is watching for and concerned about."
    The United States and China have been snarled in bouts of ti
t-for-tat tariffs that have shaken financial markets and threate
n to undermine growth in the global economy.
    Last week though, White House economic adviser Larry Kudlow,
  citing what he called very constructive talks with Beijing abo
ut ending the 16-month Sino-U.S. trade war, said the United Stat
es and China are getting close to a trade agreement. [nL2N27V00P
]
    Jim Vogel, senior rates strategist at FTN Financial in Memph
is Tennessee, said investors have shown a great deal of patience
 on the trade front and overall are optimistic a deal would be d
one.
    "Until somebody just comes out and says all talks are on hol
d, then we're going to continue to move in a range in Treasuries
, with 10-year yields broadly moving in the 1.78%-1.88% range," 
he added.
    Also on Monday, Trump and Federal Reserve Chair Jerome Powel
l met at the White House, their second meeting since Powell star
ted the job in February 2018. The Fed announced the meeting in a
 morning press release, noting they met "to discuss the economy,
 growth, employment and inflation."
    "Everything was discussed including interest rates, negative
 interest, low inflation, easing, Dollar strength & its effect o
n manufacturing, trade with China, E.U. & others, etc.," Trump t
weeted soon after, calling the session "good & cordial."
    In afternoon trading, U.S. 10-year note yields f
ell to two-week lows of 1.795% and was last at 1.810%, from 1.73
4% late on Friday.
    Yields on 30-year bonds also slid to two-week tr
oughs of 2.275% and last changed hands at 2.294% from 2.311% on 
Friday.
    On the short-end of the curve, U.S. two-year yields fell to 
1.596%, from Friday's 1.612%.
    The yield curve continued to flatten on Monday amid a stands
till on a U.S.-China trade deal, with the spread between the U.S
. two-year and 10-year note yields compressing to 21.4 basis poi
nts. The curve has flattened for four straight se
ssions.
    
      November 18 Monday 2:46PM New York / 1946 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net Cha
                                            Yield %   nge (bp
                                                      s)
 Three-month bills             1.53         1.5612    -0.008
 Six-month bills               1.54         1.5776    -0.007
 Two-year note                 99-209/256   1.596     -0.016
 Three-year note               100-18/256   1.6008    -0.016
 Five-year note                99-98/256    1.6303    -0.022
 Seven-year note               99-80/256    1.7304    -0.020
 10-year note                  99-116/256   1.8101    -0.024
 30-year bond                  101-192/256  2.294     -0.017
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net Chan  
                                            ge (bps)  
 U.S. 2-year dollar swap spre    0.75        -1.00    
 ad                                                   
 U.S. 3-year dollar swap spre   -3.00        -1.00    
 ad                                                   
 U.S. 5-year dollar swap spre   -5.25        -1.00    
 ad                                                   
 U.S. 10-year dollar swap spr  -10.50        -0.75    
 ead                                                  
 U.S. 30-year dollar swap spr  -40.25        -1.00    
 ead                                                  
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  

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